Financial Services


Here is some good news.

The Office of Fair Trading has today published a consultation on draft guidance for creditors on irresponsible lending:

The proposed guidance is set out in the consultation. It clarifies the minimum standards that are required from lenders in order to avoid the risk of OFT enforcement action. The guidance covers each stage of the lending process, and addresses specific issues which may arise. It outlines the key principles and types of behaviour that are most relevant in considering whether a lender may be carrying on irresponsible lending. The guidance identifies the types of policies and procedures that the OFT expects lenders to have in place and put into practice. It also sets out specific practices that the OFT considers constitute irresponsible lending. The OFT expects all consumer credit businesses to comply with “both the word and spirit” of the guidance.

Consumer lending is a good thing. Now, there are decent paternalist and macroeconomic arguments for stronger regulation – that is an easy case to make at the moment. However, very few people would object to either lending or the taking of interest in connection with that loan.

Even proponents of “Sharia” banking products don’t really disagree. “Halal” financial services amount, in substance if not in form, to the lending at interest. The difference is, of course, that clerics and lawyers and consumers all conspire to pretend that it is not what it obviously is. Nothing wrong with that. No different from Bach Flower remedies, really.

There are certainly some people who objected to the taking of interest, or “usury”. They include Aristotle, whose objection was as follows:

The most hated sort (of wealth getting) and with the greatest reason, is usury, which makes a gain out of money itself and not from the natural object of it. For money was intended to be used in exchange but not to increase at interest. And this term interest (tokos), which means the birth of money from money is applied to the breeding of money because the offspring resembles the parent. Wherefore of all modes of getting wealth, this is the most unnatural.” (1258b POLITICS)

Jews picked this thinking up, and transferred it to the Christians and Muslims. In their hands, the prohibition against usury became a religious taboo: akin to the prohibition of that relating to the eating of pork. Certainly, there is much theological debate and rationalisation for the religious writings of all of these faiths. However, the bottom line is that God has prohibited usury, and therefore it must not be undertaken.

Not engaging in usury, therefore, is essentially about fidelity to God’s command. It is not about consumer protection, any more than the Roman Catholic Church’s proscription of condoms while encouraging abstinence really is to do with preventing HIV infection. In some people, it might have that effect, fortuitously: but to the overwhelming majority, denial of access to that which is prohibited, is a cause of misery and suffering.

So, I’d be opposed to a campaign against usury that involved religious types who might well have a theological sense of “usury” in mind.

So, have you heard the one about the liberal journalist, the Jamaat-e-Islami aligned political activist, and the rabbi? Here is Jonathan Freedland:

Have you heard the one about the rabbi, the imam and the priest – and the trip they took together to the bank? If you’re waiting for the punchline, that will come this morning, when an unlikely platoon of religious leaders will march on the City headquarters of the Royal Bank of Scotland armed not with bricks but books. Three to be precise: the Torah, the Qur’an and the New Testament. They’ll be delivering them to the RBS chairman, Sir Philip Hampton – but not in a friendly way. They’re meant as a warning to the titans of finance that a campaign is coming, one that starts today in both Britain and the United States, aimed at changing the way banks do business by reviving a law as old as money itself.

The law in question is the prohibition on usury. You’re forgiven for stumbling on the word: the notion has fallen into such disuse, the word itself seems to come from an alien, if not dead, language. Yet it contains a powerful and simple idea: that there should be limits on the amount a lender can charge a borrower and that to charge too much interest is immoral.

Yeah well. There are some laws which prevent ‘usurious’ interest being taken: meaning excessive levels of interest. We have one ourselves – under the Consumer Credit Act 2006. Under the 1974 Act, before it was amended, there was a power to reopen ‘excessive credit bargains’. A pretty high test was required for the court to intervene: but it had the power to rewrite credit agreements. Have a look at Wilson v Secretary of State for Trade and Industry if you want to see the power in action. The new test, under the 2006 Act, is “unfairness”: which is arguably broader. Now it is up to the courts to take the lead. The relevant provisions have been fully in force for about a year now, so approaches will just be developing.

However, usury in the religious sense doesn’t mean ‘capping interest’. Not to everybody. The Jewish prohibition is very confused (as, appropriately enough is Jonathan Freedland). The Muslim one is absolute: no interest at all. But profit shares – that’s fine! The Christian one used also be absolute, but it kind of went away.

And they don’t necessarily mean it is ‘immoral’ to charge interest. “Forbidden” is sufficient.

So, it is important to know exactly what the rabbi, the priest, and the imam means when they talked about usury. Let’s hear a bit more:

It’s a word that also carries some awkward baggage. For centuries, Jews’ lives were made miserable by the accusation that they were usurers, an insult often hurled by the very Christian authorities who had forced Jews into moneylending by denying them access to any other livelihood.So it has extra poignance that today’s march on RBS will begin at Bevis Marks, Europe’s oldest functioning synagogue, and that its rabbi, Natan Asmoucha, is one of the cause’s most impassioned advocates.

Yeah, bruv. Innit. Whatevah.

“Any anti-usury campaign that does not involve Jews risks becoming an antisemitic campaign,” says Maurice Glasman, a leading activist with London Citizens, the alliance of trade unionists, voluntary organisations and religious groups that is spearheading the UK effort.

Er. I’m not entirely sure about this. Jews should get involved in opposing usury in case the organisation turns antisemitic? Well, in fairness, Maurice Glasman is probably right. But still, how depressing.

Even before they’ve started, there’s something to applaud here. It’s refreshing for Jews and Muslims, in particular, to be working together – “exciting”, says Dr Muhammad Abdul Bari of the Muslim Council of Britain – and for these communities to be engaged in interfaith action rather than another round of earnest tea-sipping in the name of “dialogue”.

Now, there are some people who say that Bari hates Jews. I am certain that he does not. I think he gets a real buzz out of joining hands with a rabbi and a vicar, who speak his language, as far as usury is concerned. I am equally sure that he is quite honestly delighted to be participating in a public event again, so soon after Daud Abdullah got cast into darkness for signing the Istanbul Declaration, that promised terrorist attacks on those who “stand with Israel”. The trouble is, Dr. Bari is the former President of Islamic Forum Europe, a body that is aligned with the Islamist Jamaat-e-Islami party. J-e-I most certainly would prohibit the taking of any interest. That is its understanding of usury.

Who was the Imam? I don’t know. I hope it wasn’t another signatory of the Istanbul Declaration, the East London Mosque’s Imam, Mr Qayyum. The group that was said to be organising this meeting is “London Citizens”, but I can’t find any mention of this event on their website.

Back to Jonathan Freedland:

It is telling that the lead voices in this new effort are from mosques, inner-city churches and synagogues. The politicians have been left looking flummoxed by the financial crisis, apparently desperate for normal business to resume as soon as possible. It has been left to the Pope to offer the most comprehensive critique of our devastated economic landscape, in his latest encyclical. But those facing crippling debts will not be too bothered by that.

No, no no, Jonathan!

Simply because it didn’t involve an effing rabbi and an imam, it doesn’t mean that the “politicians” are doing nothing. They are, for example, requiring banks to keep consumer lending going. They are consulting on ‘irresponsible lending’ with a view to tightening existing practice. And three years ago, they made it easier for courts to strike down ultra high interest rates. Just because you haven’t been following these developments, doesn’t mean that they aren’t happening.

Yes, there are people who are presently feeling the crunch. We all have friends who have suffered in one way or another. However, are you seriously telling me that you honestly and truly believe that the POPE has provided the greatest insight into our present travails? What are you talking about?!

When people are desperate, they will take leadership from wherever they can get it.

Yeah. That’s what bothers me.

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